The Malachi Group

Financial attitude

We are responsible for ourselves financially. We have heard it. We have done it. For some of us it is hard to do in this economic environment.
What a frightening, grown-up thought that is for many of us; taking responsibility for money and our financial affairs.
Financial responsibility is an attitude. Money goes out to pay for necessities and luxuries. Money must come in, in order for it to go out. How much needs to come in to equal that which is going out? For many of us that is the difficulty today. Not enough coming in for the amount of debt we have taken on. Or we have been laid off from our jobs or lost our job and money is much less and will only be arriving for a certain length of time.
What are the steps? First, address your self-esteem. We know that if we set up a plan we will have a definitive conclusion of how much money we need each month to meet all of our bills. This is not just a plan of monthly expenses, but also all non-monthly expenses (including birthdays, anniversaries, holidays, etc.) and discretionary spending. I include food and toiletries in discretionary spending because we can determine what price of foods and toiletries we will buy. For example, we can buy the grocery store brand of frozen vegetables or Birds Eye brand. We can buy Folgers coffee or Starbucks. We get to decide. That is discretionary spending.
Part of being alive means learning to handle money. A big part of handling money is our attitude. Our responsibility includes managing time so we have an appropriate allotment of time to build a Planned Spending Program. Next, we need to set financial goals. Then we have to establish the appropriate time each pay period to pay the bills. Next, we need to review our Planned Spending Program each month to make sure we are on track. If you are married, you need to set an annual meeting time to review how you did over the last year financially, and set goals for the coming year. In addition, it would be of great benefit to record every penny you spend, by expense category, for one month to see if there are financial leaks that you can plug.
Seeing the above list may seem daunting but honestly, once your Planned Spending Program is established it should only take an hour or so each month to review how you did. Actually paying the bills will vary but if you use bill pay or pay on line, it won’t take more than a couple of hours a month once the bill pay or on-line pay is established.
If you don’t have a financial software program and want to keep it simple, look at Budget Calendar software by Mishall software – www.mishell.ca. It isn’t free but at least you can try it for 30 days without having to purchase it. Most others you must buy in advance.
Ultimately, we need to understand how money works and adopt an attitude of financial responsibility for ourselves. How we deal with finances is 90% attitude. Application follows a positive attitude.

Where do I invest education money for children and grandchildren?

With the state of the economy and stock market investments that have been racked, where do we invest education money for our children and grandchildren?
Now that the stock market has broken through support that was established in November 2008, we again wonder when will recovery occur for our stock market investments. Many of us are concerned about money we have already invested or are going to invest for children and grandchildren. We could buy Treasury Bills or Bonds but the rates are so low they will not keep up with inflation.
Of course, our country is taking on an unbelievable amount of debt so now we are even questioning our country’s ability to pay interest on America’s debt. Yet, America still has the highest credit rating available, as of today, and USA taxpayers will continue to funnel money to the Treasury Dept. every year. Therefore, we know there will be revenue flow at the Treasury Dept.
If you are to the point you will not invest more education money in the stock market you can look at alternatives such as CD’s or money market accounts. Maybe even Corporate or Municipal Bonds. They both pay higher interest rates than CD’s and money market accounts. Yet there is some risk attached to them. Corporations have to retain viable status to be able to pay you interest every six months and the principal at maturity. Municipal Bonds (Muni’s) pay tax-free interest. Some may be insured, but the insurer’s solvency is in question today. Uninsured Muni’s are dependent upon the municipality to raise tax revenue to pay the interest every six months and the principal at maturity. CD’s are FDIC insured up to $250,000 when purchased from an FDIC insured institution.
Here is an option to think about for getting a decent return without putting the money in the stock market or other alternatives. It is time to take a hard look at I Bonds. Most of us know about EE Bonds, but I Bonds work differently. To help your understanding before you go to the Treasury website here is some information about I Bonds.

I Bonds are sold in denominations of $25 or more. You can purchase up to a limit of $5,000 per Social Security number. I Bonds pay a fixed rate and a variable semi-annual inflation rated. Interest can compound for 30 years. I Bonds can be redeemed after 12 months. If the I Bonds are held less than five years, there is a 3-month interest penalty. As indicated on the Treasury Direct I Bond internet page, the interest rate on I Bonds is 5.64% through April 20, 2009. At that time, the semi-annual interest rate adjustment will be made.
Several other pertinent pieces of information include that Minors may hold I Bonds in their names. You can ‘gift’ I Bonds to recipients.
Here is perhaps the most important feature of I Bonds and EE Bonds – the savings bond education tax exclusion permits qualified taxpayers to exclude from their gross income all or part of the interest paid upon the redemption or eligible EE and I Bonds issued after 1989, when the bond owner pays qualified higher education expenses at an eligible institution. There are other qualifying requirements you will need to know before you buy I Bonds. Go directly to the link provided below.
I Bonds may be an investment worth looking at during these turbulent times.

How much did I save?

Here is the scenario.
You just stepped into the department store. You have always wanted a pair of designer jeans. There they are right in front of you. Not only are they staring back at you; they are on sale. Normal price for the jeans - $100. Today and only today those jeans are on sale for $60. What a bargain. Will today be the day you take a pair home? Will you make an instantaneous purchase for your need of gratification?
I can imagine that all sorts of thoughts are running through your head, along with a number of emotions.” It is such a good deal.” “I cannot possibly pass up this opportunity”. “I do not have enough money on me now.” “There is not enough money in my checking to cover the cost of these jeans and all the other things I need to buy.” “Do I have any money in a savings account to buy the jeans?” “Is there room on my credit card to buy these jeans?” “I really need these jeans.” “I deserve to have them.” “They are on sale because I am supposed to have them.” “I would look great in these jeans.” “I will be so much happier if I own these jeans.” “They are so cheap today; maybe I should get two or three pair.” “I have never seen them on sale before. I mean never.” “It must be fate. Why else would I come to this store today?” “This sale is meant for me. I am going to buy a pair, but just one pair so I do not overspend. I am not going to go nuts.”
You find your size and try them on. They look and feel great. That makes the final sale for you. Today is the day. As you head to the cashier, you open your purse and pull out your credit card without any thought about how long it will take to pay off the cost of the jeans. You have not thought about when you can pay for the jeans (credit card) or if you will pay interest on the credit card. It has not crossed your mind about how long it will take to pay off the jeans portion of your credit card balance. You have them and that is the important thing. The cashier even compliments you on saving $40. You think, “It had to be destiny, for me to find this sale today and I saved $40.”
I think almost all of us have gone through a similar experience. But wait; let us look deeper into this purchase. Whenever I save money, I take it to the bank and put it into my account. With this transaction there was no money given to you when you made the purchase. Nothing to take to the bank and deposit.
In actuality, you spent $60 and saved nothing. Your credit card balance went up $60. If you had paid with your debit card, your checking account balance would have gone down $60. The factual truth is you did not save anything, you spent $60. You got something for the $60 but you did not save a penny. The jeans were on sale and with every sale; you have to spend money to buy something. You do not save money.
This is the classic example of how advertisers and marketers work us over to get us to invoke our emotions in making an instant gratification purchase.
Here are some tips to use when you go to the store. If you see something on sale and you immediately think you need it, take time to ponder…
1) Have I planned to purchase this?
2) Will I pay cash or take on more debt?
3) What will happen if I do not buy it?
4) Am I falling into an advertisers trap?
5) Do I want this only because it is on sale?
6) Is this in my “Spending Plan”?

There you have it. A plan to use whenever you are in a store and see something on sale that gets your undivided attention.

Financial Responsibility
“Financial responsibility” those are some words that are sometimes difficult to understand and interpret. With our economy in disarray, high unemployment, and declining real estate values, many of us have a rather bitter taste in our mouths. We may feel that we have been wronged when we bought and financed as much house as we could afford in the best of times. Now we owe more than our houses are worth and there is no appreciation in sight.
Some of us have taken on a lot of consumer debt, because it was made available to us. Now we are faced with increasing monthly credit card payments and higher interest rates. We hear stories of people who are able to call credit card companies and negotiate lower interest rates, maybe even to zero, and lower payments. There are even times that the credit card companies will forgive part of the debt. Hearing those stories makes us think about taking the opportunity to do the same.
In the past few months while in conversations with consumers, I had two people tell me that they do not mind “stiffing” the credit card companies either by debt reduction negotiation or by bankruptcy. The reason they felt as they did, involved both of them buying a personal computer and financing 100% of the purchase price on a credit card. The interest rate was high and both had taken the opportunity to tell me that they had paid for that computer two times over. Now they still owe close to the purchase price of the computer. I asked them both if they saw the interest rate and payment amount on the loan/credit card before they made the purchase. They both had. When asked if they realized they promised to pay that amount, at that interest rate, they answered affirmatively. When I asked if they felt they were taken advantage of, they both answered with a resounding – Yes. I asked if they were still using the computers and they confirmed that they are.
So where does our financial responsibility enter into the scenario I described above and what is our financial responsibility with situations in our own lives?
If we understand the loan, the loan provisions, and the use of the money, I believe we are responsible for repayment as long as we are able. Unemployment and reduced income change things. If we are not encountering unemployment or reduced income, I hope that we will take an ethical stand and say, “I am responsible for what I purchased”. Recognizing that we did have the understanding then and now. We may be angry because it has not worked out the way we wanted the event to work out but we are still responsible for the loan.
What I just described are the circumstances of a purchase. If we purchased real estate purchase, computer, or other things, and we were taken advantage of because we did not understand the conditions of a loan that is an entirely different situation.
However, if we go into a legal transaction and give our promise to pay, and understand the loan terms, then we have a legal, moral and ethical responsibility to pay as we promised to pay. We may work with the creditors to alter interest rates and payments, but the final voice comes from them. They have your promise to pay. The terms cannot be changed without their approval.
While I encouraged both of these consumers to contact their lenders and see if loan alterations could be made, both were pretty hot under the collar and were only wanting to look at getting out from under the obligation. I am not certain where that anger stems from since they both understood fully what they were getting into. As of this date, one of them has filed bankruptcy and took the computer loan into bankruptcy. The other is working to get debt reduction and settle the loan for a fixed amount that is much less than what is owed.
Both of these actions will have ramifications on their credit reports. They will be answering about their actions for years to come whenever they attempt to get another loan. The anger-based decision is seldom the one that proves worthwhile. Circumstances about those decisions will plague there credit report. Therefore, if you knew what you were doing when you signed the loan(s), isn’t it your responsibility to pay them off? Perhaps with a negotiated, lower interest rate and payment, but still to pay them in full. Negotiation with a civil, respectful tone will go a long, long way when you talk with the lender.
If someone owed you money, decided that he no longer liked the terms, the interest rate or the payment, and in anger told you that he is not paying anymore, wouldn’t you use every opportunity and every legal action to collect that debt?
Lenders have legality on their side. Consumers have the right to ask, explore and negotiate for lower interest rates, modifications and lower payments, but the ultimate decision is with the lender since they are holding our written promise to pay.
Paying off your loans in full will lead to satisfaction and gratification and you will be able to gain credit in the future much more easily than those that went through bankruptcy. Every credit application I have ever seen asks if you have gone bankrupt in the last seven years. That means very time you apply for a loan you will have to give a written reason for the bankruptcy. For some people I do understand that because of insurmountable conditions bankruptcy is what they have to do. However, that should be a last resort rather than a first option.
Let’s make a stand as responsible citizens and pay back our debt as we have promised to do. It just might change the culture of our country.

Save a thousand

Many people ask me how they can save money for vacations without having to make deep sacrifices or huge changes in their financial lives.
Here is a plan to pay for a vacation that only requires a small life change.
First of all, the key ingredients include:
1) Are you willing to commit to a change in your life to get the vacation?
2) Is the end (vacation) worth the means (change)?
3) Are you willing to give up a habit to accomplish the goal?
4) Does it have to be a first class vacation, where you fly, dine and flop on the beach or by the pool? Or can it be a realistic middle-income vacation?
If you are willing, here is a plan for the vacation. Not an all out French Riviera vacation but one that you can achieve saving for in a year, paying cash for the vacation and have a blast.
Here is the life change required to get a week of relaxing bliss. Instead of going to coffee shop each day and getting a fancy coffee drink ($4.50) and a pastry ($3.00) have a bagel at home and just get a house coffee ($1.80). If you buy a coffee house mug, some places will fill it each day for 50 cents.
Let’s tally this up for a year. We will assume you go to the coffee shop five days a week, 50 weeks a year.
Here is an example of the cost of a specialty coffee and pastry for a year.
Coffee – per day $4.50
Pastry – per day $3.50
Total Cost per day - $8.00
Total Cost per Week - $40.00
Total Cost per Year - $2,000.00


Here is the cost of getting a daily ‘house coffee’ and eating a bagel at home.
Bag of Bagels $4.99 divided by 12 = 42 cents per day.
House Coffee at coffee shop = $1.80
Total Cost per day = $2.22
Total Cost per week = $11.10
Total Cost per year = $555.00
****Savings per Year = $1,445.00
Let’s be realistic and say you cheat on this plan occasionally. You should still be able to save a $1,000 in a year. May I recommend that you deposit the money you save each week into a savings account? If you stay disciplined, you will deposit $28.90 a week into the account. You will be able to see the balance grow but don’t count on much interest. When you get close to the goal, you can start planning the vacation.
Where to go? Have you ever considered a Time Share rental (www.timeshare-resales-rental.com)? They are available all over the world. The location I researched was Palm Springs, California. There are time-shares available for rent for $700 a week. While other time-share rentals are negotiable and others are more expensive. Cost depends on when you are going.
May I suggest going a week or two before premium rates go into effect? That way you will get the discount very near the premium time.
If you start this plan and stick with it for a year, you will experience great satisfaction in accomplishing the goal. It will enhance your self-worth because you have made a little sacrifice, saved and achieved. There is no better vacation than paying cash for it. You will find great enjoyment as you lounge by the pool.
Who knows? Maybe you will even start enjoying bagels and straight coffee!

Here is a new opportunity for you to participate in learning how to "Master Your Money". There will be a class offered through Poway Adult School that Jerry will teach on February 7 and 14. Time is 9-11 a.m. Check out their website at powayusd.com
You can register online!
This is a great opportunity to get started fresh with your finances in the New Year!
You will receive helpful tips and advice, as well as the opportunity to build your own "planned spending program" for the coming year!
Sign up now!

For those of you that are struggling with high interest rate credit card loans; you may be able to negotiate with the credit companies yourself. It will take effort and persistence on your part to get through to the Collections department. Once there, have ready a breakdown of all your expenses, monthly and non-monthly. They will want to go over it with you. You will need to prove hardship but that you can meet a payment that you recommend which you can pay every month without being delinquent. Once they have asked about your income and expenses they will most likely offer you a negotiated payout, if and only if you have verification that you can make the payments. That verification is based upon the information you provide them and their calculations. Be prepared and know your exact answers before they start asking. Once they have reviewed your case and make an offer, be prepared to accept or decline immediately. In the last two weeks several of our clients have negotiated on their own and have seen dramatic drops in interest rates and payments. Factual example - an interest rate of 26.99% was reduced to 5.75% for five years.

Should you need assistance in preparing for the credit card negotiations our financial coaches will guide you in preparing a 'planned spending program' and have the exact instructions of how to reach the appropriate departments at the credit card companies to begin negotiations.